Equitable liability legislation unveiled

HMRC have produced draft legislation on preserving the effect of equitable liability, the extra-statutory concession (ECS) that was saved from being axed last year.

Following the House of Lords' judgment in Wilkinson [2006] STC 270, the Revenue reviewed its array of ESCs and decided to withdraw or legislate for the ones that exceeded their administrative powers.

Equitable liability – the practice of not pursuing tax in cases in which doing so would be ‘unconscionable’ – was among ten concessions that were scheduled to be withdrawn. It had been deployed by the taxman to reduce legally due direct liabilities to the sum that would have been payable had the taxpayer complied on time with his or her obligations under the tax system.

The proposed abolition of equitable liability in May 2009 quickly led to a backlash from the tax industry. Following various meetings with interested parties, the previous Government announced that legislation would be introduced to preserve the effect of the ESC.

A consultation document on the new draft rules is available online. Comments should be emailed by 1 October to Katie Lunt.

Barrister Keith Gordon was one of the profession’s most vocal opponents to the withdrawal of equitable liability. He said he was ‘delighted that the recent uncertainty concerning the equitable liability practice should soon be gone when it receives statutory backing’.

However, Mr Gordon added a note of concern that ‘the proposed code will allow taxpayers to use the practice once only. While that should be sufficient in most cases, this is the kind of area where flexibility, when applied with common sense, should be maintained.’

Issue Extract

draftlegislationforequitableliability.pdf

Issue: 4264 / Categories: News , ECS , equitable liability , Keith Gordon , xtra-statutory concession , Admin